With the record growth of San Antonio, Houston and Austin, southern Texas is becoming a hub for business. Here’s how four community banks are thriving in this environment.
By Mindy Charski
There’s a lot of energy in the southern half of Texas, and it’s not just the resources that power our homes and cars. This region has the kind of energy that draws people to a place and helps them and their businesses thrive.
The 2020 Census quantified the growth many residents were already sensing: Austin grew by 33% between 2010 and 2020, earning it the rank of fastest-growing large metro. The Houston metro took the 10th spot with a 20.3% increase, while the San Antonio metro, up 19.4%, ranked 12th.
Corporate relocations and expansions—influenced by factors like affordability, low corporate tax rates, no personal income tax and a rich talent pool—have contributed to a momentum that isn’t likely to subside soon.
The state is growing an impressive technology roster, for example. It includes Hewlett Packard Enterprise, which is moving its headquarters to the Houston area. Elon Musk’s Tesla is shifting its home base to Austin, about six hours north of Boca Chica, Texas, where his commercial spaceflight company, SpaceX, is building and testing rockets. Samsung plans to build a $17 billion chip plant in town about 30 miles away from its existing facility in Austin.
Military installations also contribute to the region’s economy. Those in south central Texas, which includes San Antonio, supported an estimated 211,000 jobs and contributed nearly $25.2 billion to the state’s GDP in 2019, according to state records. That year, installations further south, in the region that includes Brownsville and Corpus Christi, supported an estimated 41,000 jobs and contributed about $4.6 billion to the state’s output.
Other sectors contributing to the state’s vibrancy include ranching, healthcare and even wineries. Clearly, community banks in the region have plenty of opportunities to do what they do best: forge deep and lasting relationships with their customers and communities. We spoke with four community banks in the southern half of Texas to learn how they are serving this buzzing region.
San Antonio has proved itself as a place full of business and opportunity. Amarillo National Bank (ANB) in Amarillo, Texas, plans to open its first full-service retail branch in the home of the Alamo this year, but the $7.6-billion asset community bank has been loaning money in the city and surrounding areas for nearly a decade, according to Travis Edlund, senior vice president and regional manager of the San Antonio market.
Some clients who have relationships with ANB have expanded their businesses into downstate markets. “San Antonio became a real attractive place for some of these businesses to grow, and as they did, they took Amarillo National Bank with them and then they referred some people to us here locally,” Edlund says. “Just providing good service and, frankly, just answering the phone makes it pretty easy to grow business.”
By October 2020, ANB had amassed about $500 million in loan commitments in San Antonio and surrounding markets. That month, Edlund, a native San Antonian, helped open a loan production office in his hometown with his sights set on subsequently launching a full-service branch.
Since opening the loan production office, the community bank has booked about $105 million more in loans.
ANB does “traditional lending in every aspect,” Edlund says, but commercial loans make up the majority of its loan portfolio. These include family-owned businesses, community businesses and operating companies. “Anybody that has accounts receivable, inventory, equipment and employees, and acts as an operating business is our core business,” he says.
Edlund adds that ANB also does working capital lending, energy lending and real estate and development lending. Consumer mortgage and installment lending are in the mix as well.
“There’s really not a lot we can’t do,” Edlund says. “We have the ability to make sure we take our time with everybody we do business with.”
ANB is currently managed by two great-great-grandsons of its founder, giving them insight into what it means to be family-owned.
“I’d say for community banks in general, one of the advantages we give family-owned businesses is that we’ve been there,” says Edlund. “We’ve experienced the transition of some of the exit planning, and we’re happy to be a trusted advisor that has a different perspective, because we’ve gone through it.”
Capitalizing on an area’s growing popularity
The hot real estate market of the past two years in the San Antonio and Austin areas has been a boon for $152 million-asset Johnson City Bank in Johnson City, Texas. Real estate loans make up the biggest portion of its portfolio by far, and that portfolio grew 12% to 15% in 2021, according to the community bank’s president, Ken Finley.
Both Johnson City Bank and its single location in the Texas Hill Country town were named after President Lyndon Johnson, whose family helped develop the area.
“We do a lot of one-to-four family lending, and then a lot of other real estate loans some of the bigger banks or mortgage companies won’t handle,” Finley says. For example, a customer recently approached him about financing a property with multiple structures that included two houses and multiple barns, which doesn’t fit the criteria for an acceptable loan at many banks.
“As long as the land value is there and the property value is there, we’d gladly try to do stuff like that,” says Finley, who is also president of another bank owned by the same family, $91 million-asset Bandera Bank in nearby Bandera, Texas. “There’s nothing wrong with a five-acre tract of land that has multiple buildings on it.”
Johnson City Bank has also been doing a lot of construction loans lately, according to Finley, as well as some spec lending. In addition, it has some commercial real estate business.
Though borrowers in the counties it serves have plenty of potential lenders, Finley says the community bank’s customer service helps it win clients and referrals. “We keep the loans we make, so if there’s ever an issue the customer has, they can walk in the door and take care of the issue,” he says. “They don’t have to worry about doing it over the phone and talking to someone out of state or even out of the country.” He adds that the bank also offers prompt responses to loan requests.
This kind of personal touch and respect for the customer is not new for the bank. Back in 1970, when vice president and cashier Brenda Haynes was a new employee filing checks, Johnson City Bank was the hometown institution people chose to work with because they wanted to feel known by their bank, she says. Today the bank still delivers on that desire.
“After about the first two times [customers] come through the door, we know them by their first name and joke with them and visit with them,” Haynes says. “You don’t find that everywhere. We take time for our customers.”
Small businesses are the backbone of Texas First Bank, a $2 billion-asset bank based in Texas City, Texas, with 27 banking centers primarily in the Houston metro. Many are affected by the ups and downs of the energy sector. Some have direct ties to it, selling equipment to the oil exploration industry or working as contractors, for example. Others are plumbers, dry cleaners or restaurants who provide services for the sector’s workforce.
“Everyone is somehow or another impacted by energy,” says David Daspit, Texas First Bank’s chief credit officer and regional loan president. “It’s just the nature of who we are in Texas. I’ve been doing this over 40 years, and our dependence on energy is certainly less than it was when I was a very young banker, but it’s still very significant.”
Previous plant expansions by big energy companies have benefited the southeast Texas communities the community bank serves, but the recent downturn led many industry giants to put further expansions on hold. Many of the bank’s clients share that conservatism. “Currently, the climate is one of caution for our small-business customers,” Daspit says. “Business investment in facilities, equipment, etc., is not what we would hope it would be.”
However, Daspit attributes much of the success of Texas First Bank, which was founded in 1973, to the personal relationships it has with customers.
“It’s knowing our clients and oftentimes anticipating what their needs are going to be and helping them achieve whatever goals they may have,” Daspit says, before pausing to greet a longtime customer. He notes that when that customer’s company was struggling about 20 years ago, another bank “didn’t have quite the same outlook for their business as we thought it might have,” Daspit says. “We were able to help them, and they’ve been loyal customers ever since.”
Local knowledge is everything
Being involved in local communities is another secret to the bank’s success, Daspit says. Texas First Bank contributes to charitable organizations, and he says its bankers are “highly encouraged” to serve on boards and committees of local organizations.
Daspit, who is based in Baytown, Texas, has held leadership roles in his local Rotary Club and at the United Way. He currently sits on the board of the Baytown Chamber of Commerce. “Serving our clients is serving our community,” he says. “You can’t do one without doing the other.”
A group effort helped Frost soar with PPP loans
When small businesses could start applying for loans under the Small Business Administration’s Paycheck Protection Program (PPP) in April 2020, $47.9 billion-asset Frost Bank got busy. Real busy. More than 500 staffers volunteered to help process loan applications, according to the 2020 annual report of the San Antonio-based bank. Across its 155 financial centers, private bankers, compliance officers, IT professionals and auditors were among those manually inputting loans into the system and calling applicants who had incomplete paperwork.
The money for the first tranche of the PPP ran out after 13 days, and during that time Frost had obtained loan approvals for nearly 11,000 businesses totaling $3.2 billion, the report notes. It adds that at one point during that initial period, “despite being around the 50th largest bank in the country, we were 14th in terms of the dollar amount of loan approvals in the United States.” More money flowed into the program, and Frost would ultimately issue 32,500 PPP loans totaling about $3.4 billion.
“It was a huge effort for our bankers, but we recognized how badly our customers needed that boost,” says Bill Day, senior vice president and corporate communication manager at Frost. He adds that more than 90% of the community bank’s PPP borrowers have already begun or completed the loan forgiveness process.
Storm-ravaged communities rely on Texas First Bank
Texas First Bank’s banking centers are on or near the Gulf Coast, and that can be a precarious footprint to have during the Atlantic hurricane season, which typically runs from June through November. Many of its locations have been affected over the years, including an office on the Bolivar Peninsula in Galveston County that was entirely washed away by Hurricane Ike in 2008 and had to be relocated.
The community bank has a robust disaster plan that helps it reopen banking centers as safely and as quickly as possible. After all, the needs of affected clients can seem almost as immense as the storm itself. Insurance claims take time, and eventual payments don’t always cover all the expenses facing a homeowner or business.
Some storms require extra doses of creativity and generosity. For example, soon after Hurricane Harvey flooded much of the Gulf Coast in August 2017, Texas First Bank partnered with the Galveston Economic Development Partnership and two other Galveston-based community banks, HomeTown Bank and Moody National Bank, to create the Hurricane Harvey Business Recovery Loan Program.
The program enabled businesses to obtain a 180-day loan with a fixed rate of 4% APR, which was close to the overnight prime interest rate. The banks provided between $10 million and $12 million in loans.
In a write-up about its post-Harvey efforts, Texas First Bank stated the community banks “joined together to do what was right and show a united front.”
Where to go in San Antonio
San Antonio is best known for the Alamo and the River Walk, a 15-mile-long landscaped path lined with restaurants, hotels, shops and museums.
Those aren’t to be missed, but here are some other destinations that attendees of ICBA LIVE 2022 should consider while in the Alamo City, according to community bankers.
“Mexican food and the margaritas are probably top of mind to everybody when they come to San Antonio,” says Travis Edlund, senior vice president and regional manager of Amarillo National Bank’s San Antonio market. For those and other delights, he recommends visiting Pearl, a cultural hub with shopping and dining; the RIM shopping center; and the artsy neighborhood of Southtown.
For a puro San Antonio experience, “it’s hard to beat Mi Tierra, a 24-hour restaurant in the historic Mercado district downtown,” says Bill Day, senior vice president and corporate communication manager at San Antonio-based Frost Bank. The restaurant opened in 1941 and bills itself as “the place hometown regulars and hungry tourists go for authentic Mexican food and a warm Texas welcome.”
For history buffs
“Everyone knows about the Alamo,” Day says, “but not everyone knows it is just one of five historic old Spanish missions in San Antonio dating back to the 1700s.” Head to the Mission Trails hike-and-bike system for access to pedestrian, bicycle and vehicular routes that connect the five colonial missions and other historic sites.
Ken Finley, president of Johnson City Bank and Bandera Bank, both of which are headquartered about an hour from San Antonio, recommends stopping at the Buckhorn Saloon & Museum. Established in 1881, the downtown attraction includes an exotic animal collection, the Texas Ranger Museum and a space to enjoy burgers and prickly pear margaritas under the gaze of more than a few mounted animal heads.
Mindy Charski is a writer in Texas.